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The figures from this latest Daft.ie House Price Report show only modest price increases around the country between June and September. Compared to the 4.3% quarterly increases seen in the first two quarters of this year, the average list price nationally rose by just 0.3% in the third quarter of 2017.

List prices tend to ease back slightly in the final three months of the year – having fallen in the final quarter of 2014, 2015 and 2016. Excluding the final quarter of the year, though, the increase seen between June and September this year was the smallest nationally since prices bottomed out in late 2013.

If you check the last Daft.ie House Price Report, you’ll see the commentary there focuses on how the large increases were in line with what you would expect to happen once the Central Bank relaxed the minimum deposit requirement in late 2016. So how can we marry the findings from three months ago with those from this report?

The perhaps counterintuitive answer is that they are entirely consistent with each other. Economists like to distinguish between levels and changes. There are a number of key factors that affect house prices, but they can be split in to ones that have a one–off effect (an effect on levels) and those that have a more permanent effect (an effect on changes).

For example, if the long–run average rate of economic growth rose – as happened in the late 1990s compared to the early 1990s – this would have a quasi–permanent effect on house price growth. Going from expecting economic growth of close to zero, in real terms, to a trend growth rate of close to 5% means that this additional surplus every year would feed through into either more people or more incomes. Both will translate into extra housing demand and therefore – unless supply responds – higher prices.

The same logic applies to the introduction of Central Bank rules back in late 2014. This occurred at a time when expectations of future house price growth had gone from roughly zero in mid–2013 to double–digit rates. If people expect house prices to go up by, say, 10% a year for the next five or more years, then there will be far greater demand than if prices are static or indeed falling by 10% a year.

The introduction of the Central Bank rules cooled and capped such sentiments, bringing the expected house price change over the next year in Dublin from 12% in September 2014, just before they were announced, to 3% a year later. Unsurprisingly, house prices in Dublin saw far less growth in the 18 months after the rules were brought in than in the 18 months before: 4% versus 32%, to be exact.

The change in the Central Bank rules, on the other hand, lifted the ceiling on house prices somewhat, especially in Dublin where the rules were hardest felt. The natural consequence would be to see a one–off jump in housing prices – rather than a change in the average rate of inflation. For that to happen, the Central Bank would need to relax its rules every year.

In some respects, the Central Bank’s change to its own mortgage rules so soon after their implementation has been lost in the much greater scrutiny attached to the almost simultaneous announcement of a Help–to–Buy scheme by the Government in Budget 2017. However, it is much harder to weave a narrative involving the Help–to–Buy scheme and recent market development, at least one consistent with economics.

In particular, the Help–to–Buy scheme is capped and thus would be expected to have a far greater impact in cheaper markets than in expensive ones. The opposite trend was seen in the market, which is exactly what the relaxation of Central Bank rules would be expected to do.

But, more importantly, there are simply too few newly built homes for the tail to wag the dog. In the final nine months of 2016, before the scheme went live, roughly 15% of transactions related to newly built homes. In the first nine months of 2017, the fraction is higher but only just: 17%. These fractions also represent an upper–bound for Help–to–Buy: even now, some of the properties designated as newly built were actually built many years ago, while others will not be eligible because they are too expensive.

Where to next for Ireland’s sales market? It is roughly three years now since a consensus emerged that the problem was not another credit bubble but rather a lack of housing supply. However, most of the many policy initiatives introduced have been about manipulating demand and prices. If the housing system in Ireland is to become healthy, the next three years really must see a change of policy focus to supply and quantities.

In particular, as long as it remains unviable to build homes, especially apartments of varying kinds, in the vast majority of the country, the shortages will persist, both in market housing and in social housing. Understanding why costs are so high relative to both our own incomes and to costs in other countries must become the top priority for the Housing Minister and his civil servants.